Y owns a home in which she has lived with her spouse, Z, for seven years.On June 2, 20X2, the home was sold at a gain of $325,000.How much gain must Y recognize?

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Quizplus · Accepted Answer

Under the IRS Section 121 exclusion, if Y and Z file jointly, they can exclude up to $500,000 of gain from the sale of their primary residence if they owned and lived in the home for at least 2 of the 5 years prior to the sale. Since the gain is $325,000 and they meet the ownership and use tests, they can exclude the entire gain if they file jointly.

Y Owns a Home in Which She Has Lived with Her